Method and system for dynamically controlling overtime in electronic auctions

ABSTRACT

A method and system for conducting electronic auctions is described. A dynamic lot closing extension feature avoids collisions in closing times of multiple lots by dynamically extending the closing time of a subsequent lot if a preceding lot&#39;s closing time is extended to be too close to the subsequent lot&#39;s then-currently scheduled closing time. Scheduled closing times can be extended with a flexible overtime feature, in which the properties of the event triggering the extension and the duration of the overtime period(s) can be tailored to a particular auction, particular lots of products within an auction, and to the particular time within an auction process. The bidding status of a lot can be set to a “pending” status after the nominal closing time for submission of bids to allow bidders to alert the auction coordinator of technical problems in submission of bids. This allows the possibility for a lot to be return to open status for further bidding by all bidders. The auction may be paused by the auction coordinator to correct technical, market and miscellaneous problems that may arise during the course of an auction. Individual bid ceilings can be set for each bidder so that they are required to bid lower than certain thresholds determined in advance of the auction. Failsafe error detection is performed to prevent erroneous bids from entering the auction. The auction coordinator has the ability to override any erroneous bids that are entered to prevent prejudice to the auction.

BACKGROUND OF THE INVENTION

[0001] The disclosed inventions relate generally to conductingelectronic auctions, and in particular to business-to-business biddingauctions for industrial purchasers.

TRADITIONAL PROCUREMENT MODELS

[0002] Procurement of supplies has traditionally involved hightransaction costs, especially information search costs. The introductionof electronic commerce has introduced new methods of procurement thatlower some of the transaction costs associated with procurement. Onlineprocurement, or business-to-business electronic commerce, matches buyersand suppliers so that transactions can take place electronically. Thereare three models for online procurement: catalog, buyer-bidding auction,and seller-bidding auction.

[0003] The “catalog” model of online procurement was the first to bedeveloped. The first electronic catalogs were developed by suppliers tohelp customers obtain information about products and order supplieselectronically. These first electronic catalogs were single-source; i.e.they only allowed customers to obtain information and products from thatsupplier.

[0004] However, customers were not satisfied with being “locked in” toone supplier—they wanted to be able to compare a number of competingproducts to be sure of getting the product features they wanted, at thebest price. So suppliers with single-source electronic catalogs startedto include competitors' products on their systems. An example of this isAmerican's SABRE system, which includes offerings from competingsuppliers (airlines), thereby further reducing information search costs.By offering competing products, the electronic catalog that offerscompetitor's products becomes an “electronic market”.

[0005] Many of these systems are biased towards the supplier offeringthe electronic market. Procurement costs can be further lowered with anunbiased electronic market that promotes competition.

[0006] For standard products and services, the need to have an unbiasedmarket has been met for many industries by third party “market makers.”For example, Inventory Locator Services has compiled a database thatlists all airplane parts suppliers that have a certain item in stock.Buyers dial into the database to get information on the parts they need.Here, it is a third party, Inventory Locator Service, not a supplier,creating the unbiased electronic market.

[0007] The electronic catalog model of electronic commerce involves onebuyer and one seller at a time. When many buyers compete for the rightto buy from one seller, a buyer-bidding auction model is created. Anoteworthy example of the buyer-bidding auction model is that operatedby PriceLine.com and described in U.S. Pat. No. 5,794,207 issued toWalker et al. In this system, potential buyers compete for airlinetickets by submitting a bid for an airline ticket on the PriceLinewebsite, and airlines can choose to accept a bid, thereby committing thebuyer to buy the ticket.

[0008] The catalog and buyer-bidding auction types of electronic marketsdo not work in some situations however. If the required product iscustom, it is not possible for suppliers to publish a set price for acatalog market. Likewise, it is not possible for buyers to identify theproduct they want to bid on in a buyer-bidding auction. There are fewersuppliers and no standard product and pricing information available forthe buyer of custom industrial products. Traditionally, when a companyrequires a custom industrial product, procurement is made by a buyer forthe company who searches for a supplier and acquires price quotes from apotential supplier for the needed custom product. The search is slow andsomewhat random because it usually relies heavily on personalrelationships. The costs associated with locating vendors, comparingtheir products, negotiating, and paperwork are a big factor in themake-or-buy decision. The cost of switching suppliers is very large,which means that the quoted price is probably not the lowest fair priceand that it is hard for a new supplier to enter the market.

[0009] Therefore, buyers wanted to use auctions to save money. Theassignee of the present application developed a system wherein sellersdownwardly bid against one another to achieve the lowest market price ina supplier-bidding auction.

Supplier-Bidding Auction

[0010] In a supplier-bidding auction, bid prices start high and movedownward in reverse-auction format as bidders interact to establish aclosing price. The auction marketplace is one-sided, i.e. one buyer andmany potential suppliers. Typically, the products being purchased arecomponents or materials. “Components” typically mean fabricated tangiblepieces or parts that become part of assemblies of durable products.Example components include gears, bearings, appliance shelves or doorhandles. “Materials” typically mean bulk quantities of raw materialsthat are further transformed into product. Example materials includecorn syrup or sheet steel.

[0011] Industrial buyers do not typically purchase one component at atime. Rather, they purchase whole families of similar components. Attimes, components are strongly related to one another. As an example, abuyer might purchase a given plastic knob in two different colors, ormight purchase a nameplate in four different languages. These parts areso similar that by definition they must be purchased from the samesupplier—all of the knobs are made using the same mold. These items aretherefore grouped into a single lot. Bidders in industrial auctions mustprovide unit price quotes for all line items in a lot.

Auction Process

[0012] The process for a supplier-bidding auction as conducted by theassignee of the present application is described below with reference toFIGS. 1 and 2. FIG. 1 illustrates the functional elements and entitiesin an supplier-bidding auction, while FIG. 2 is a process diagram thatidentifies the tasks performed by each of the involved entities.

[0013] The supplier-bidding auction model requires that the biddingproduct or service be defined by the buyer (identified as Buyer 10 inFIG. 1). An auction coordinator (Coordinator 20 in FIG. 1) works withbuyers to prepare for and conduct an auction and to define thepotentially new supply relationships resulting from the auction.

[0014] As shown in FIG. 2, in the Initial Contact phase 102 of theauction process, the coordinator contacts the buyer, and the buyerprovides data to the coordinator. The coordinator prepares aspecification 50 for each desired product or part 52. Once the product52 is defined, potential suppliers for the product are identified. Thecoordinator 20 and buyer 10 work together to compile this list ofpotential suppliers from suppliers already known to the buyer as well assuppliers recommended by the coordinator.

[0015] The buyer makes a decision regarding which potential supplierswill receive invitations to the upcoming Auction. Suppliers that acceptAuction invitations are then sent notices regarding the upcomingAuction, as well as client software to install in preparation ofparticipating the Auction.

[0016] In the RFQ phase 104, coordinator 20 works with the buyer 10 toprepare a Request for Quotation (“RFQ”) 54. The coordinator collects andmaintains the RFQ data provided by buyer 10, and then publishes the RFQ,and manages the published RFQ. The RFQ includes specifications 50 forall of the parts 52 covered by the RFQ. In the RFQ 54, buyer 10aggregates similar part or commodity line items into job “lots.” Theselots allow suppliers 30 to bid on that portion of the business for whichthey are best suited.

[0017] During the auction 56, bids 58 will be taken against individuallots (and their constituent parts 52) within RFQ 54. While bidders mustsubmit actual unit prices for all line items, the competition in anAuction is based on the aggregate value bid for lots. The aggregatevalue bid for a lot depends upon the level and mix of line item bids andthe quantity for each line item. Therefore, bidders submit bids at theline item level, but compete on the lot level.

[0018] In the Auction Administration phase 106, coordinator 20coordinates the Auction and administers the Auction setup andpreparation. The coordinator sends a RFQ to each participating supplier,and assists participating suppliers with preparation for the Auction.

[0019] In the Auction phase 108, suppliers 30 submit bids 58 on the lotsand monitor the progress of the bidding by the participating suppliers30. The coordinator assists, observes, and administers the Auction.

[0020] When the bidding period is over, the auction enters the AuctionResults Administration phase 110. In this phase, coordinator 20 analyzesand administers the Auction results, which are viewed by buyer 10. Thebuyer begins to conduct final qualification of the low biddingsupplier(s). The buyer may retain the right not to award business to alow bidding supplier based on final qualification results or otherbusiness concerns.

[0021] In the ensuing Contract Administration phase 112, the coordinatorfacilitates settlements 62 awarded by the buyer 10 to suppliers 30.Contracts 52 are then drawn up between buyer 10 and suppliers 30.

Communications and Software

[0022] The Auction is conducted electronically between potentialsuppliers 30 at their respective remote sites and the coordinator 20 atits site. As shown in FIGS. 3 and 4, information is conveyed between thecoordinator 20 and the suppliers 30 via a communications medium such asa network service provider 40 accessed by the participants through, forexample, dial-up telephone connections using modems, or direct networkconnections. A computer software application is used to manage theAuction. The software application has two components: a client component31 and a server component 23. The client component 31 operates on acomputer at the site of each of the potential suppliers 30. The clientcomponent is used by suppliers 30 to make bids during the Auction. Thebids are sent via the network service provider 40 to the site of thecoordinator, where it is received by the server component 23 of thesoftware application. The client component includes software used tomake a connection through telephone lines or the Internet to the servercomponent. Bids are submitted over this connection and updates are sentto connected bidders.

[0023] Bids can only be submitted using the client component of theapplication—this ensures that buyers do not circumvent the biddingprocess, and that only invited suppliers participate in the bidding.Typically, bidders can see their bids and bids placed by other suppliersfor each lot on the client component. When a bidder submits a bid, thatbid is sent to the server component and evaluated to determine whetherthe bid is from an authorized bidder, and whether the bid has exceeded apre-determined maximum acceptable price. Bids placed by a supplier arebroadcast to all connected bidders thereby enabling every participatingbidder to see quickly the change in market conditions and begin planningtheir competitive responses.

Conduct of an Auction

[0024] The conduct of an Auction will now be described in conjunctionwith the operation of the software application. The Auction is conductedon a specified date, and commences at a specified time. Bidding on eachof the lots of products involved is scheduled to begin simultaneously atthe start time for the Auction. Each lot is assigned a scheduled closingtime after which further bids by potential suppliers submitted via theclient application will not be accepted by the server application. Theclosing times for the lots are staggered so that they are notcoterminous.

[0025] Associated with each lot at any given time in the progress of theAuction is a bidding status. The possible bidding statuses areillustrated in FIG. 5. The status initially assigned to each lot, beforethe scheduled start time of the Auction, is “Available.” This statusindicates that the lot will be available for bidding in the Auction. Inthe normal sequence of an Auction, the next bidding status is “Open,”which indicates that the Auction is underway and that bids can besubmitted for the lot. There are two possible bidding statuses to whicha lot with an “Open” status can change: “Overtime” and “Closed.”Overtime indicates an extension of time to allow bidding to continueafter the scheduled closing time for bidding on the lot. If bidding isstill active at the end of a first Overtime period of predeterminedduration, the server application allows a second Overtime, and so on,until bidding has closed. “Closed” indicates that the server applicationwill no longer accept bids on the lot. A lot's status changes fromOvertime only to Closed.

[0026] Information regarding the Auction that can be displayed by theclient application is illustrated in FIGS. 6A-6D at selected timesduring the conduct of an Auction. FIG. 6A illustrates lot informationprovided at the start of an Auction. The lot closing times are shown foreach of the lots (01-08) as 10:30:00 AM, etc. The lots are identified byname (e.g. “PP-Gas assist” which stands for “Gas Assist PolypropyleneParts” for lot 01). The indicated status for each lot is “OPEN.” The“Market Bid” column indicates the current lowest or best bid for thelot. The current time (10:00:11 AM) is shown in the upper right cornerof the display.

[0027] The presented information changes during the course of bidding.For purposes of illustration in this example, a series of bids for lot01 is shown in FIG. 8. Selected bids are identified by an “Event” code(A, B, etc.) in the first column. The bidder's identity is shown in thesecond column. The time at which the bid was submitted and the amount ofthe bid are shown in the third and fourth columns. Finally, the best bidin existence at the time of each subsequent bid is shown in the lastcolumn.

[0028] The changes in status of lot 01 are also illustrated in FIG. 7for selected times and corresponding bidding events during the Auction.FIG. 7A shows a time line for lot 01, with the bid event letterscorresponding to the bids in FIG. 8.

[0029] This Auction employs a decision rule to trigger overtime that canbe stated: “when a low bid is submitted during a first time interval tbefore the scheduled close, reschedule the close to occur later by onetime interval t.” Thus, for a time interval t of one minute, a scheduledclosing time of 10:30 is extended to 10:31 if overtime is triggered.

[0030] In this example, Bid A is received at 10:26:49. This bid has noeffect on the status or on the scheduled closing time of lot 01, becauseit does not arrive within one minute of the scheduled closing time of10:30.

[0031] When bid B is received, the status of lot 01 immediately changesto Overtime, because bid B is a low bid and is received at 10:29:06,within one minute of 10:30. The scheduled closing time is thereforedelayed until 10:31, which is one increment t (one minute) after theoriginal closing time of 10:30. This additional increment is availablefor bidders to consider whether to submit a bid in response to bid B.

[0032] When bid C is received, the status of the lot remains overtime,but because it was a new low bid and was received at 10:30:03, withinone increment t of the then-scheduled closing time of 10:31, thescheduled closing time is further delayed by one increment t to 10:32.

[0033] When bid D is received at 10:30:45, there is no effect on thestatus of the scheduled closing time, because although the bid is a newlow bid ($371,373) it is not received within one minute of thethen-scheduled closing time of 10:32.

[0034] Although Bid E is received within one minute of the scheduledclosing time of 10:32, it is not a new low bid (i.e. is greater than371,373) and therefore no additional time is added. Lot 01 thereforecloses at 10:32.

[0035]FIG. 6B shows the status of the Auction at 10:27. Lot 01 is shownas “Open,” with a current Market Bid (best current bid) of $374,586.This reflects the status after bidding several bids have been received.FIG. 6C illustrates the status of the Auction at 10:30 AM, after bids Band C. In bid B, Bidder 15 submitted another best bid ($373,063), whichinitiated a one-minute overtime period, extending the closing time forlot 1 to 10:31. In bid C, Bidder 7 submitted another best bid($372,500), which initiated another one-minute overtime period,extending the closing time for lot 1 to 10:32. Bid D, submitted at10:30:45 was another best bid ($371,373), but was not submitted withinone minute of the 10:32 closing time. Bid E, although submitted at10:31:45, within one minute of closing, was not a new low bid andtherefore did not extend the closing time for Lot 1. Lot 1 thereforeclosed at 10:32, with a Market Bid of $371,373, as shown in FIG. 6D(which shows the status of the Auction at 10:32:05).

Bidding Dynamics

[0036] Suppliers prepare their price quotes in light of a number offactors. These factors include raw material prices, the design ofexisting dies or fixtures, the dimensional tolerance required of thecomponent, the amount of engineering support the purchaser desires, thespeed with which this particular buyer pays invoices, and the distancethe product must be shipped.

[0037] Supplier-specific factors also affect the price quotes. Capacityavailability, desirability of this particular buyer as a customer,desired levels of profit, and desire to diversify into other markets canall affect the price the seller is willing to accept to supply theneeded product. Market-specific factors that are not predictable duringthe preparation of quotations but that are evident during the auctioncan also be important in determining, for example, how aggressivelyother participants may bid.

[0038] Because business-to-business auctions are conducted for importantcustom components, low bidders may still be “passed over” if otherbidders demonstrate non-price advantages.

[0039] Sometimes auctions involve parts that this purchaser has procuredbefore, and are possibly being made currently by one or more suppliers.These would be termed “existing parts.” When a part is currently beingmade by a supplier, that supplier would be termed the “incumbentsupplier.” In an auction situation, the incumbent supplier is placed ina position of having to defend its contract with the purchaser.

[0040] Incumbent suppliers are expected to behave differently thanoutsiders. An incumbent, for example, knows that the buyer's switchingcosts favor the incumbent even at a price premium to the market. Becausethe buyer may pass over low bidders incumbent suppliers can takeadvantage of their incumbent status.

[0041] Certain human factors must also be considered when conductingbusiness-to-business auctions for industrial purchasing. If notconsidered, these human factors can interfere with achieving desiredoutcomes. Bidders must be comfortable with the auction software. Biddersoften speak English as a second language, or not at all, making itdesirable to provide interpreters.

[0042] Bidders must often respond to multi-million-dollar decisions in afew seconds. The fast response required creates cognitive limits—abidder cannot realistically focus on more than one decision at a time.Many bidders are under some sort of emotional stress when participating,due to the change involved. In some cases, incumbent bidders areliterally “fighting for their lives” in situations where losing thecontract in question literally means losing their business.

Problems with Prior Auction Process

[0043] The prior auction process described above has been found toproduce suboptimal results for buyers in light of the market dynamicsissues identified above in some circumstances. The problems include: a)multiple lot closing time collisions; b) premature lot closings; c)difficult and inflexible bidding constraints due to lot/line itemstructure; d) possible prejudice to bidders resulting from technicaldisruptions; and e) possible prejudice to bidders resulting fromsubmission of erroneous bids.

[0044] The first problem is collision of closing times for multiplelots. As described above, the initially scheduled closing times formultiple lots are staggered, so that the lots close at different times,with 10-20 minute intervals between lots. This allows suppliers whowould like to bid on multiple lots the opportunity to do so, withouthaving to bid on each lot at the same time. By spacing the closing timesfor each lot, a supplier knows that while bidding on one lot, the nextlot in the Auction will not close. This staggered closing is one way towork around cognitive limits—each lot is sequenced so that bidders canpay attention to one lot at a time.

[0045] Overtime delays on an early lot can reduce the time intervalbefore the scheduled closing time of a subsequent lot. In fact, overtimedelays have at times overrun the scheduled closing time of a subsequentlot. This situation begins to tax cognitive limits, and biddingopportunities on the subsequent lots are often missed. Although thisproblem might be resolved by spacing market closing times at asubstantial distance apart, experience has shown that even this approachwould not be sufficient. For example, in one Auction with 2 lotsscheduled with 20 minutes between closing times, actual bidding on thefirst lot continued for 5 hours and 31 minutes after scheduled close.

[0046] The second problem is premature closing of bidding on lots. Justas in an in-person auction, bidding activity tends to increase close tothe scheduled closing time. Like the “going, going, gone” auctionconcept, it is possible to achieve a better auction price if the auctionis allowed to continue if bids are still being made. As described above,this concept in implemented through the use of “Overtime,” by which theclosing time of a specific lot is automatically extended based on theflow of bids into the Auction. Overtime prevents bidders from hangingback and submitting last minute bids in an attempt to preventcompetitive reaction.

[0047] In the prior system, if a valid, low bid is received in aspecified time interval before a lot's scheduled closing time, then theclosing time is amended (delayed) to give other bidders more time toreact to the late-arriving bid. A bid for second place, something anincumbent supplier might be expected to do, would not trigger anovertime. Unlike in-person auctions, industrial auctions need to allowsecond place bids. Thus, it has been found that this is an overlysimplistic model, which may still be cutting off bidding too soon. A lowbidder needs a chance to react to a second place bid, but it cannot ifthat second place bid does not trigger overtime. Therefore, it woulddesirable to be able to trigger Overtime, or extend Overtime, on thebasis of more complex bid scenarios.

[0048] It has also been found that it would be preferable to have moreflexibility in the operation of overtime. Overtime is currentlyimplemented with fixed offsets between lot closing times, with fixedtrigger time frames (the period before scheduled closing or currentOvertime ending), and fixed extension periods for Overtime. Inindustrial markets, bidding events involve commodities of varyingcomplexity and component packages of different sizes. Accordingly,bidders may need more or less overtime to respond to a bid. The amountof overtime may need to be customized for specific bidding events or forindividual lots within an Auction to obtain the optimal market dynamic.It is therefore desirable to provide more flexibility in Overtime.

[0049] Another difficulty encountered by bidders in the prior system isthat bids needed to be made at the line item level. However, the auctiontakes place at the lot level, where all of the line item quotes areadded up to one sum. This dual structure results from the nature of theindustrial market. Price quotations may be built from many cost elementsthat are added up to form price quotes for individual items or groups ofitems. Some cost elements or items within a market may be negotiable andothers may be fixed depending on factors specific to each bidder. Forexample, a fabricator may not have control of raw material costs. Thecompetition for a lot can thus involve many independent and dependentfactors. Bids are placed in real-time and often in rapid successions.This requires bidders to quickly adjust price quotations for an entirelot, even though this lot may be comprised of hundreds of individualitems or cost elements. Initial online auctions only allowed line itemprice adjustments, and it was difficult to fine-tune the mix of bids. Abidder would have to individually adjust line items, while the softwarecalculated new total lot price bids. This was frequently tootime-consuming to keep pace with the auction.

[0050] With the time constraints on bidding, bidders wanted the abilityto be able to rapidly adjust the lot price without specifically changingindividual line items. Therefore, “pro rata” bid adjustment wasdeveloped. With pro rata bid adjustment, bidders could change the totallot price quote, and the software would apportion pro rata the changeacross individual line items in the lot. However, a pro rataapportionment may result in individual items being priced at levels thatare uneconomic for the bidder. For some items the bidders may wish toset decision rules for adjusting the unit price quotes at the line itemlevel. For example, bidders may wish to lock-in a preset floor orceiling on particular line items within a low. These decision rules, or“locks” cause the pro rata adjustments to be applied selectively insteadof universally.

[0051] Another problem that can arise either in regular bidding or inOvertime is addressing technical disruptions. Real-time technical oroperational disruptions in the communications network, software orhardware during the course of a bidding event may prevent a bidder fromfully participating. Disruptions may arise in the online network or dueto the equipment used by an individual bidder.

[0052] In addition, market events or imperfections may disrupt biddingactivity and require communication with bidders before the auction cancontinue. For example, in one auction bidding for an auction lotcommenced and it became clear that some of the bidders were includingtooling costs and some were not. The correct assumption was to excludetooling costs. In this example, the bidders needed to be contacted andinformed of the correction before the auction could proceed with allbidders on an equal footing.

[0053] Other external factors may disrupt the operation of the auctionor participation by bidders. In another example, a snow storm preventedmany bidders from getting to work on time for the opening of theauction. This was not discovered until many bidders failed to commencebidding.

[0054] With a business-to-business transaction, it is typicallycommercially unacceptable for any bidder to be denied fullparticipation. However, where disruptions arise in the course of abidding event, the bidding activity and positions of other bidderscannot be prejudiced. Accordingly, market closing times may need to besuspended pending the resolution of a disruption experienced by one ormore bidders. This is especially true where it is not clear how long itwill take to resolve the problems encountered, including whether it willbe possible to resolve all problems prior to the close of an auctionlot.

[0055] Another problem that occurred in the previous system was thesubmission of erroneous bids. Bidding errors can happen due to thenature of the online auction. The pace or intensity of the biddingactivity can exceed cognitive limits of bidders. In an effort to keepup, bidders enter incorrect quote amounts. Bidders are frequentlyinterested in bidding on multiple lots. In the course of monitoring orswitching between lots, the bidder erroneously enters a bid intended forLot A into Lot B.

[0056] In the industrial market, the stakes can be quite large, withcontracts awarded for millions of dollars and for contracts that canlast for several years. Therefore, the economic damage to suppliers thatwould be incurred by honoring an erroneous bid is substantial.

[0057] In an online industrial auction, an incorrect bid can upset thebidding behavior of other bidders creating inequity for all participantsin the market. All bidders in the marketplace view market conditionsbased on bids placed by other bidders, and respond. They do so relyingon the implicit assumption that all bids are valid. If one of the bidsis made in error, and the other bidders proceed to bid in response, theintegrity of the auction is damaged. This can result in sub-optimalresults for both buyers and suppliers.

SUMMARY OF THE INVENTION

[0058] The problems encountered with the operation of the prior auctionsystem are overcome by the auction system of the invention, whichenables flexible dynamic alterations of market closing times, line itemdecision rules, auction pause, bidder-specific bid limits, and theability to detect and prevent erroneous bids.

[0059] The amount of overtime added each time a relevant new bid isreceived can be adjusted to suit the complexity and size of the marketlots involved in the bidding event. This permits bidders to have moreovertime to respond to each new bid if the commodity complexity ormarket lot size require additional bid calculation time.

[0060] The trigger for additional overtime can be flexibly set toinclude a range of behind-market bidding activity. The type ofbehind-market activity that would trigger additional overtime includesbids or bidders of a defined rank behind market and bids of a definedabsolute or relative (percentage) quantity behind the market. Additionaltrigger parameters can also be flexibly created to suit particularindustrial markets. This ensures that extra overtime is triggered whencertain bids upset the market dynamic.

[0061] In multi-market, or multi-lot bidding events, where prior marketlots run into overtime, the closing times of subsequent market lots aredynamically altered during the course of an event to maintain a minimumtime period between market closings. When market closings have beenaltered to accommodate this market dynamic, the market status isreferred to as “Extended.” This ensures that markets do not “collide” orrun on top of one another when overtime from an earlier market lotcontinues past the scheduled closing time for a subsequent market lot.Bidders are guaranteed that markets close one at a time, so they are notplaced in the position of having to bid for different market lots at thesame time.

[0062] Once bidding activity has ceased, a lot is placed into “Pending”status prior to closing the lot. The lot closing time can be dynamicallyaltered to meet the time period required to resolve any technicaldisruptions experienced by bidders. From Pending status, lots can be setto automatically close after a predefined period of time has elapsedwith no technical disruptions reported by bidders, or the lot can bemanually closed or held in pending status. Following the resolution of atechnical disruption a lot can be returned to “Open” status for allparticipants to allow bidding activity to continue. Pending status willthen be used again to dynamically alter lot closing times until allbidders have fully participated with no technical disruptions. Thisensures that all bidders may place all bids irrespective of anytechnical disruptions that occur during the event without prejudicingthe positions and bidding activity of other bidders.

[0063] “Pause” status ensures that disruptions to an auction can bedealt with equitably without prejudicing existing bidding activity orpositions achieved by bidders. Auction Pause allows the auctioncoordinator to indefinitely “freeze” an auction without disrupting thebids placed before the pause went into effect. The Pause status can beapplied to an entire auction (all lots) or to specific lots within anauction. The Pause status can be applied at any time during an auctionand will override any other status currently in effect. In oneembodiment, no bidder is able to submit bids while the auction is inPause status. In an alternate embodiment, bids may continue to bereceived but would not be entered into the auction. In this embodiment,bids could be held in a queue awaiting entry upon the removal of thePause status.

[0064] Flexible bidder-determined line item decision rules for biddingpermits bidders to set specific price decision rules for aspects ofindividual line items within a lot. For example, price limits for lineitems can be established at the initial price quote entered for thatitem or at a floor or ceiling above or below the initial quote.Different decision rules can be set for different items and rules can beset across some or all of the line items within a lot. Decision rulescan be set dynamically during the course of the bidding event by thebidder.

[0065] Flexible line-item decision rules enable bidders to lock-in afixed and variable portion of the price quote prior to the bid. Totalbids for a lot can then be adjusted rapidly in response to marketactivity without changing individual line item quotes to uneconomiclevels. In addition, bidders have the comfort of setting floors orceilings on individual or cost component bids. During the bidding event,fixed components can be reevaluated and unlocked if necessary inresponse to movements in the market beyond original expectations. Thisbidding flexibility allows bidders to participate in the auction fully,and increases competition.

[0066] Bidder-specific bid rules enable an auction coordinator tomaximize the competitive nature of an auction. In a downward auction,each bidder is assigned an individual bid ceiling by the buyer. This bidceiling sets a maximum bid price that can be submitted by a supplier.The bid ceilings are advantageous to the buyer because it prevents abidder from withholding pre-auction bids from the market.

[0067] The ability to detect, prevent and remove erroneous bids ensuresthat erroneous bids can be dealt with equitably without prejudicingother bidders or interrupting the auction. A confirmation box ispresented to the bidder to confirm the amount of a bid to be entered.All bids must be checked and confirmed before they will be submitted tothe auction server. Predefined “failsafe” rules allow the bidder tolimit bids to a certain range. If during the course of an auction, thebidder bids outside that range, additional bid confirmations may berequired, or the bidder may be prevented entirely from entering bidsthat fail “failsafe” criteria. The auction coordinator may override orremove erroneous bids from the auction in real-time. Bids can be quicklyand efficiently removed before it prejudices the positions of otherbidders and prior to lot closing.

BRIEF DESCRIPTION OF THE DRAWINGS

[0068]FIG. 1 is a schematic illustration of the elements and entitiesinvolved in an auction process.

[0069]FIG. 2 is a schematic illustration of the tasks performed by theentities involved in an auction process.

[0070]FIG. 3 is a schematic illustration of the communications linksbetween the coordinator and the potential suppliers in an Auction.

[0071]FIG. 4 is a schematic illustration of the client and servercomponents of the computer software application that conducts theAuction and the hardware at the sites of the coordinator and thepotential suppliers on which the client and server components operate.

[0072]FIG. 5 is a schematic illustration of the possible bidding statesin the prior auction system.

[0073] FIGS. 6A-6D illustrate the information displayed by the clientapplication in the prior auction system at various times during a sampleAuction.

[0074] FIGS. 7A-7B illustrate the change in bidding status of one lot inthe Auction illustrated in FIGS. 6A-6D.

[0075]FIG. 8 illustrates a series of bids submitted on one of the lotsduring the Auction illustrated in FIGS. 6A-6D.

[0076] FIGS. 9A-9B illustrate the changes in bidding status and closingtimes for multiple lots using the dynamic lot closing extension feature.

[0077]FIG. 10 is a schematic illustration of the possible bidding statesin the auction system.

[0078]FIG. 11 is a flow chart illustrating the operation of the dynamiclot closing extension feature.

[0079]FIG. 12 is a flow chart illustrating the operation of the flexibleovertime feature.

[0080]FIG. 13 is a flow chart illustrating the operation of the pendingfeature.

[0081]FIG. 14 is a flow chart illustrating the operation of the failsafeerror detection features.

[0082] FIGS. 15A-15C illustrate error detection warning and confirmationmessages.

DETAILED DESCRIPTION

[0083] The auction method and system of the invention are describedbelow. Seven aspects of the system and method are described: a) dynamiclot closing extension; b) flexible overtime; c) flexiblebidder-determined line item decision rules; d) pending status; e)bidder-specific bid limits; f) auction pause; and g) error detection andprevention.

Dynamic Lot Closing Extension

[0084] The problem identified above of multiple lot closing collisionsis addressed with the dynamic lot closing extension feature. Thisfeature involves rescheduling, or extending, the closing time of asubsequent lot when the closing time of a preceding lot is extended tothe point where it becomes unacceptably close in time to the subsequentlot's then-scheduled closing time. Thus, this feature involves adding arule to the lot closing determination that can be stated as: “Maintain aminimum time interval between the closing time of one lot and theclosing time of the next subsequent lot.” This feature is illustratedwith reference to FIGS. 9A-9B.

[0085]FIG. 9A illustrates a time line divided into time intervals of Δtbetween times t1, t2, etc. The scheduled bidding periods for two lots inthe Auction are times t1 (the opening time for the Auction) through t6(the initially scheduled closing time) for Lot X, and time t1-t11 forLot Y. As described above with reference to the prior system, thescheduled closing times t6 and t11 are staggered to permit potentialsuppliers to focus their attention on bidding on a prior lot (Lot X)before it closes, then to turn their attention to bidding on asubsequent lot (Lot Y) with adequate time before it closes. The timeinterval between the initially-scheduled closing times t6 and t11 isfive time increments Δt. The minimum time interval that is to bemaintained between the closing time is three time increments Δt.

[0086]FIG. 9B shows the changes of status of various parameters in theauction as bids are received. FIG. 9B identifies the time intervalduring which the bid is received, the bidding status of Lot X before andafter the bid is received, the bidding status of Lot Y before and afterthe bid is received, the closing time of Lot X before and after the bidis received, and the closing time of Lot Y before and after the bid isreceived.

[0087] The Auction begins at time t1. At the beginning of the Auction,and during the initial course of bidding, both lots have a biddingstatus “Open.” During the course of bidding, a bid submitted on Lot Xcan trigger an extension of Lot X's closing time (e.g. a new market bidsubmitted within a predetermined amount of time before the closingtime). Thus, bids A and B do not change the bidding status of Lot X orthe closing times of the lots, because they are not received within atrigger period before the scheduled closing time of Lot X (in thisinstance, the trigger period is one interval Δt). However, bid C, whichis a new low bid received within the time interval t5-t6 (within Δt ofclosing time t6), triggers “Overtime” for Lot X. This is reflected inFIG. 9B, which indicates that the bidding status of Lot X was “Open”before the bid and “Overtime” after the bid. The scheduled closing timefor Lot X is extended by an Overtime interval (defined in this exampleto be one interval Δt) from t6 to t7. Since there are still three timeintervals Δt between the closing time of Lots X and Y (t7-t11), there isno change to the closing time of Lot Y.

[0088] When Bid D is received, the status of Lot X remains “Overtime,”but because it was received within one increment At of thethen-scheduled closing time t7, the scheduled closing time is furtherextended by one increment Δt to t8. Again, there are still at leastthree intervals Δt between the lots' closing times (t8-t11) so there isno effect on the closing time of Lot Y.

[0089] When Bid E is received, both the bidding status and the closingtime of Lot X are unaffected, because the bid is received more than oneinterval before the scheduled closing time t8.

[0090] Finally, when Bid F is received in the interval between t7 andt8, the closing time for Lot X is extended by another increment Δt tot9. Because this extension in Lot X's closing time would reduce theinterval between the lots' closing times to below the minimum intervalof three Δt's, Bid F triggers Lot Y to change status from Open toExtended, and extends the closing time for Lot Y to t12.

[0091] The Extended status can be applied to more than one subsequentlot . Thus, if the rescheduled closing time for the first lot reducesthe interval to the second lot's closing time to less than the minimuminterval, and the second lot's closing time is therefore extendedsufficiently long that it in turn is too close to the scheduled closingtime of a third lot, the third lot's closing time is in turn extended tobe at least the minimum interval beyond the second lot's closing time.

[0092] Flexible market closing extensions is implemented in the auctionsystem by storing a parameter in storage 22B that specifies the minimuminterval between lot closings (see FIG. 4). This parameter is read fromstorage 22B into memory 22A for use by the server component of theapplication software when an Auction is loaded. When the closing timefor a given lot is adjusted, the closing time for the immediatelysubsequent lot is evaluated to determine whether the time intervalbetween the adjusted closing time and the subsequent lot's closing timeis smaller than the minimum interval between lot closings specified. Ifit is, the subsequent lot's closing time is adjusted so that thedifference between the two equals the minimum interval. If it is not, noadjustment is made to the closing time of the subsequent interval.

[0093] In an alternative embodiment, multiple parameters are stored instorage 22B. These multiple parameters specify the individual minimumintervals between the closing times of the multiple lots. The individualminimum intervals can be based upon the characteristics of the lotitself or various indicia reflective of the market activity for the lot.The individual minimum intervals can therefore be dynamic in nature.

[0094] The operation of the flexible market closing extensions featureis illustrated in the flow chart of FIG. 11. The process for dynamicallyextending the closing time of multiple lots is shown as process 500. TheAuction continually receives bids at step 510 until a predeterminedinterval of time before the scheduled closing time (the closing triggerinterval). This is shown by the step 510-step 520 loop. At the closingtrigger interval time, the software checks to see if any trigger bidshave been made at step 530. For example, if the closing time interval is2 minutes, then at 2 minutes before the scheduled closing of the lot,the software will check to see whether any trigger bids have been made.

[0095] If no trigger bids have been made, the software checks to seewhether it is closing time at step 540 before continuing to accept bidsat step 510. The step 510-step 520-step 530-step 540 loop may occur manytimes during the closing time trigger interval. If no trigger bids arereceived during this time, then the lot closes at step 550 at thescheduled closing time.

[0096] If there is a trigger bid received during this time, then theprocess continues to step 560, where an Overtime interval is added tothe scheduled closing time for that lot. The software then checks theclosing time of the subsequent lot in step 570. A comparison is made instep 580 to determine if the closing time of the subsequent lot needs tobe dynamically altered. If the interval of time between the scheduledclosing time of the Overtime lot and the scheduled closing time of thenext lot is greater than or equal to the minimum lot closing interval,then no extensions are necessary, and the process returns to step 510,where bids for the current lot are again received.

[0097] If the interval of time between the newly scheduled closing timeof the current lot and the scheduled closing time of the next lot isless than the minimum closing interval, then the next lot needs to beextended to maintain the minimum closing time interval. This occurs instep 590.

[0098] If the next lot has to be extended, there is a chance, aftermultiple extensions, that it will run into the lot following it.Therefore, loop 590-570-580 is processed to check subsequent lots, andextend them if necessary, to maintain the minimum closing intervalbetween each lot. This loop is executed until all lots as necessary havebeen extended to maintain the minimum closing interval, at which point,bids for the current lot are again received at step 510.

Flexible Overtime

[0099] As described above, the prior auction system employed a simple,static model for Overtime, in which Overtime was triggered by a new lowbid submitted within a predetermined time interval before a scheduledclosing time, and the scheduled closing time was extended by apredetermined time period. This rule can be articulated as: “amarket-setting low bid, received in the appropriate increment Δt beforea scheduled closing triggers overtime and adds an increment Δt to thescheduled closing time.” This Overtime rule was applied to all Auctions,to all lots in an Auction, at all times during an Auction. The flexibleovertime feature of the present auction system addresses theshortcomings of the prior static overtime feature.

[0100] Flexible overtime has two aspects: variable duration of overtimeintervals and variable overtime triggers. The variable duration aspectinvolves overtime extension intervals (time intervals by which ascheduled closing time, whether an initially-scheduled time or anextended time, is extended) and overtime trigger intervals (intervalsbefore a scheduled closing time in which a bid meeting defined criteriawill trigger overtime). These intervals can be the same (as in the priorsystem), or can be different from each other. The intervals can vary inlength from lot to lot. Thus, the first lot might have an overtimeextension interval and an overtime trigger interval of 1 minute, while asecond, more complex or significant lot might have intervals of 2minutes.

[0101] The second aspect of flexible overtime is variable overtimetriggers. The trigger for each lot is bid-related, in that it involvesan evaluation of some attribute or attributes of a bid against one ormore trigger criteria. In the prior system, the attribute of a bid thatwas evaluated was the price of the bid with respect to the current best(lowest priced) bid. Overtime was triggered if the price of a new bidsubmitted within the appropriate interval was lower than the currentbest bid. In the disclosed auction system, overtime triggers can bebased on other parameters and criteria. For example, the rank of a bidcan be considered, and overtime triggered based in part on whether therank of the bid is lower than the established criterion. Thus, thecriterion can be established that a trigger bid must be a bid that is anew best bid or is the second or third best bid.

[0102] A further possible criterion, which can be applied in tandem withor independent of the ranking criterion, is that the bid must besufficiently close to the best bid in terms of some parameter ofquality. For the simplest bid evaluation, the parameter of quality for abid is the bid price (e.g. in dollars). The criterion can be establishedthat a trigger bid must have a price that is lower than, or higher thanbut within a predetermined absolute or percentage difference from, thecurrent best bid.

[0103] Thus, decision rules for overtime triggering can be defined indifferent ways, such as:

[0104] A bid within 2% of the price of the then-low bid, if receivedwithin the appropriate time interval before the scheduled close time,triggers overtime

[0105] Any bid, if received in the appropriate interval before ascheduled close, triggers overtime

[0106] A bid by a supplier identified to the server as an incumbentsupplier, if received in the appropriate time interval before ascheduled close, triggers overtime.

[0107] It might also be desirable to include the option to vary theovertime extension interval dynamically during the course of theAuction.

[0108] It should be noted that an overtime trigger can also be basedupon evaluations of the characteristics of a subgroup or the entiregroup of bids (e.g., increase in frequency of bids, statistical analysisof bid values for entire group or particular supplier). As a generalrule, the overtime trigger seeks to extend the auction for a lot ifthere is any indication that further bidding would somehow beadvantageous to the buyer.

[0109] Flexible overtime can be implemented in the illustrated auctionsystem in a variety of ways. In one embodiment, a parameter is stored instorage 22B that specifies the length of the overtime period for eachlot. This parameter is read from storage 22B into memory 22A for use bythe server component of the application software when an Auction isloaded. When overtime is triggered on a given lot, the server componentadds the value of that lot's overtime parameter to the market closingtime, adjusting its closing time accordingly.

[0110] Second, flexible overtime triggers are implemented by storing twoparameters (in the same manner as the other parameters above): one thatspecifies the market rank necessary for a bid to trigger overtime andone that specifies a maximum distance, expressed as either a percentageor a nominal value, that a bid can be from the market-leading bid totrigger overtime. Each bid received is evaluated against theseparameters to determine whether overtime should be triggered.

[0111] In an alternate embodiment, flexible overtime triggers areimplemented by writing a specific module of code for each lot andreferencing that code by the server component each time a bid isentered. The code module takes as input parameters such as the currentbid, the next closest bid, the current bid time, the next closest bidtime, the current low bid, the low bid time, the then-scheduled closetime, etc. Using logic that can be tailored to each lot, the code modulereturns a value of “true” if that bid should trigger an overtime, or“false” if it should not.

[0112] The operation of the flexible overtime feature is illustrated inthe flow chart in FIG. 12 for process 600. Bids are received at step 610until it is closing time for the current lot. In step 620, adetermination is made whether the current bid was submitted during aclosing time trigger interval (i.e. in the trigger interval before thecurrently-scheduled closing time). If not, the process loops back tostep 610 until the next bid is received. If so, the bid is thenevaluated at step 630 to determine if it is “better” (by whateverquality parameter is selected, such as price) than the current best bid.If so, then the process goes to step 640, where the best bid is setequal to the current bid. Under the rule set implemented in thisembodiment, a new best bid in the overtime trigger interval alwaystriggers overtime—the process therefore proceeds to step 670, whereovertime is initiated (or extended). If the current bid is not betterthan the best bid, the process proceeds from step 630 to step 650, wherethe determination is made whether the bid otherwise meets the overtimetrigger criterion. In this case, the test is whether the bid is withinsome predetermined amount of a selected quality parameter (e.g. price)of the best bid. If it is, overtime is triggered (or extended). If not,the process loops back to step 610 to receive the next bid.

Flexible Bidder-Determined Line Item Decision Rules

[0113] This bidding feature of the auction system of the inventionprovides a method for allowing bidders to bid at the lot or line itemlevel, while maintaining flexible decision rules on individual lineitems. Generally, a flexible line-item decision rule enables a buyer toautomatically adjust aspects of line item level bids based upon one ormore inputs at the lot or line item level.

[0114] In one embodiment, a flexible line-item decision rule isimplemented by creating fixed and variable components of a bid on eachof the line items that comprise a lot. Limits for individual items canbe established at the initial price quote entered for that item or at afloor or ceiling below or above the initial quote. Different limits canbe set for different line items and limits can be set across some or allof the items or components within a lot or market.

[0115] When bids are decreased at the lot level, the amount by whichthey are decreased at the line item level is pro rated across theunlocked portion of the line item price bids. Pro rata adjustments willnot affect the locked (or fixed) component of the line items. Thus, thelocked portion remains unchanged. However, limits can be locked andunlocked dynamically during the course of an Auction by the bidder.

[0116] This particular flexible line-item decision rule allows biddersto lock in a fixed and a variable portion of the price quote prior tothe bid. Total bids for a lot can then be adjusted rapidly in responseto market activity without changing individual item quotes to uneconomiclevels. Further, bidders have the comfort of setting floors or ceilingson all or part of individual line item bids. During the Auction, fixedcomponents can be re-evaluated and unlocked if necessary in response tomovement in the market for the lot beyond original expectations.

[0117] In a case where a total bid is decreased by more than the sum ofall unlocked line item bids, the bid is rejected. Therefore, a total bidwill never be less than the sum of the locked portion of the line itembids. Items can be locked or unlocked at any time during the biddingevent.

[0118] An example of the Lock/Unlock feature is shown below. Initially,line item 1 is partially locked and line item 2 is entirely unlocked.Line Item Locked Unlocked Total Price 1 $1.00 $9.00 $10.00 2 $0.00$20.00 $20.00 $30.00 Lot Price

[0119] The bidder chooses to drop the lot price, by 10% (or $3). The $3adjustment is then apportioned on a pro rata basis to the unlockedportions of the individual line item bids. In this case, line item #1 isreduced by $0.93 (i.e., $3×9/29), and line item #2 is reduced by $2.07(i.e., $3×20/29). The result of these pro rata line item adjustments isreflected by the following: Line Item Locked Unlocked Total Price 1$1.00 $8.07  $9.07 2 $0.00 $17.93 $17.93 $27.00 Lot Price

[0120] The locked/unlocked feature is implemented in the auction systemby data structures maintained in the client software that supportcapture of locked and unlocked unit price bids at the line item leveland by providing a user interface to accept the locked/unlockedinformation from the bidder.

[0121] It should be noted that the locked/unlocked feature representsonly one example of a flexible line-item decision rule that can beimplemented. Generally, a line item bid can be adjusted based upon oneor more changes at the lot or line item level. These flexible line-itemdecision rule can be created to accommodate any pre-auction biddingstrategy that could be jeopardized by the bidder's interaction in areal-time auction event. For example, a customized flexible line-itemdecision rule can be created such that the price of a first line itemmaintains a specified proportion to the price of a second line item.This particular flexible line-item decision rule may be important wherethe bidder must ensure that one or more particular line item bidsconform to internal corporate guidelines (e.g., marketing, accounting,sales, etc.). More generally, it is contemplated by the presentinvention that any aspect of a line item bid (e.g., unit price,quantity, delivery time, line item characteristic, etc.) can be relatedto, and thereby adjusted, based upon a change in one or more aspects ofthe supplier's bid at either the lot or line item level.

Pending Status

[0122] The pending status feature of the auction system of the inventionprovides an intermediate bidding status for each lot to transition thelot from a status in which bids can be submitted (Open, Overtime,Extended) to a status in which bids will no longer be accepted (Closed).The intermediate bidding status is “Pending.” This status indicates thatbids are not being accepted on the lot but that the lot may subsequentlybe returned to Open status for bidding. This allows a time period for abidder who has missed an opportunity to bid because of a technical fault(e.g. communications or computer hardware or software failure) tocontact the coordinator to alert the coordinator to the fault. Thecoordinator can then evaluate the asserted fault and determine whetherit is appropriate to allow further bidding on the lot. If so, the lotcan be returned to Open status for bidding. If not, the lot is Closed.The lot can be returned to Open status immediately upon thedetermination by the coordinator that this is appropriate, or it can beheld in Pending status while a convenient time to re-open is scheduled.

[0123] Pending status is implemented in the illustrated auction systemby storing two parameters in storage 22B: one parameter that specifiesthe length of the pending interval and one that specifies whether a lotshould automatically close when that interval expires. The lengthparameter can be set differently for each lot. These parameters are readfrom storage 22B into memory 22A for use by the server component of theapplication software when an Auction is loaded. When the scheduledclosing time for a lot is reached, the bidding status is set to“Pending” instead of “Closed.” If the automatic close flag is set to“YES”, then a clock begins to count down the pending interval. If noother intervention takes place and the pending interval expires, thenthe lot is closed automatically. If the automatic close flag is set to“NO,” then the lot will remain in the Pending status until manualintervention takes place. Manual intervention in either case can takethe form of changing the automatic close flag (either from NO to YES orfrom YES to NO), returning the lot to open status and setting a newclose time, or manually closing the market.

[0124] The operation of the pending status feature is illustrated in theflow chart of FIG. 13, as shown in process 700. Bids are received atstep 710 until it is closing time for the current lot at step 720.Although not shown in FIG. 13, this process can include Overtimes andExtensions as described above. At the actual lot closing time, thesoftware sets up for processing the pending status at step 730. HereStatus is set to “Pending”, the Auto_close flag is set to YES and thepending clock is started (pending_time=maximum pending time).

[0125] At this point, if no external events occur, the lot will remainin the Pending state through the pending time, and then become Closed.This is reflected through steps 750-780-785-760-770. The step 750-step780 loop is executed throughout the pending period until pending_time is0, at which point step 760 is executed. Nothing has occurred that wouldchange the value of Auto_close, so it is still YES, therefore step 770will be executed, and the lot closes.

[0126] One external event that can occur is a bidder calling thecoordinator during the Pending period to communicate problems thatoccurred during the bidding for that lot. If this happens, thecoordinator manually changes Auto_close to NO in external event step740. This will not affect anything in the loop 750-780—the softwarecontinues to check the status during the pending time, but not theAuto_close flag. At the end of the pending time, step 760 is executed.This time, since Auto_close was changed to NO by the coordinator, theprocess loops back to step 780, where the status is checked. The loop750-760-780 will be executed repeatedly until the coordinator manuallychanges either the Auto_close flag or the Status. If afterinvestigation, it turns out that the bidding does not need to bereturned to open status, then the coordinator can change the Auto_closeflag back to YES 744, and the process will exit the loop at step 760,going to step 770, and closing the lot. If after investigation it isdecided that the bidding should be reopened for that lot, thecoordinator can manually change the status to OPEN. After the status ischanged, the loop will exit at step 780, going to step 790. The closingtime for this lot will be adjusted to a new scheduled closing time, andthe Auction will start receiving bids again for that lot at step 710.The entire process 700 is repeated.

Bidding Statuses

[0127] The possible bidding statuses for the present auction system andmethod are identified in FIG. 10. In addition to the statuses identifiedin FIG. 5 for the prior auction system, the present system includes thestatuses of Extended and Pending. As shown in FIG. 10, a lot can changefrom Open status to Overtime, Extended or Pending. A lot can change fromOvertime to Pending status. Further, a lot can change from Pending toOpen or Closed status.

Auction Pause

[0128] Auction Pause allows the auction coordinator to indefinitely“freeze” an auction, without disrupting the bids placed before the pausewent into effect. The pause status can be applied to an entire auction(all lots) or to specific lots within an auction. The Pause status canbe applied at any time during an auction and will override any otherstatus currently in effect. While in Pause status, all existing bids arepreserved. An entire auction (or individual auction lots) can be held inPause status for an indefinite period of time. In one embodiment, nobidder is able to submit bids while the auction is in Pause status. Inan alternate embodiment, bids may continue to be received but would notbe entered into the auction. In this embodiment, bids could be held in aqueue awaiting entry upon the removal of the Pause status.

[0129] The auction coordinator determines the lot status that appliesonce the pause is removed. While in Pause status, the auction serverclock will continue to operate. Hence, without any intervention by theauction coordinator, the lot status that applies once the pause isremoved will be the lot status that would have been in effect in thenormal course of operations had it not been for the pause (theunderlying status). For example, if the scheduled lot closing timepasses while the lot is in pause, and the auction coordinator lifts thepause status, the auction lot will return to “Closed” status. However,the auction coordinator can alter the scheduled timing that applies toall lots (i.e. alter the opening and closing times) to ensure thecorrect lot status applies once the pause is removed. Thus, all bidderssee the auction server clock match the correct time while the auctioncoordinator can achieve any relevant lot status once the pause isremoved.

[0130] For example, as shown below in Table 1, an online auction isscheduled to open at 9:00 am at which time all lots will open. Currenttime is 8:45 AM so all lots are currently in Available status. TABLE 1Current Time: 8:45:52 AM Lot # Lot Name Opening Time Closing Time Status1 Screws 9:00:00 AM  9:30:00 AM Available 2 Nuts 9:00:00 AM 10:00:00 AMAvailable 3 Bolts 9:00:00 AM 10:30:00 AM Available

[0131] Suppose there is a technical disruption at 8:50 AM and theauction coordinator is not sure how long it will take to resolve theissue. Instead of canceling the auction, the auction coordinator placesthe entire auction in Pause status. The auction now appears as shown inTable 2. TABLE 2 Current Time: 8:50:31 AM Lot # Lot Name Opening TimeClosing Time Status 1 Screws 9:00:00 AM  9:30:00 AM Pause 2 Nuts 9:00:00AM 10:00:00 AM Pause 3 Bolts 9:00:00 AM 10:30:00 AM Pause

[0132] The technical disruption is resolved at 9:32 AM. At this point,if the auction coordinator lifted the Pause status, Lot 1 wouldimmediately go to Pending and then to Close three minutes later. (Inthis example, the pending interval has been set to a total of 5 minutesafter scheduled close by the auction coordinator.) Bidders wouldtherefore not have an opportunity to place bids for Lot 1. To avoid thisoutcome, the auction coordinator decides to alter the opening times forall lots to 9:45 AM and shift the closing times to 30-minutes intervalsthereafter. Once the Pause is lifted, this has the effect of returningall lots to Available status, and bidders can commence bidding when thelots open at 9:45 AM. The auction now appears as shown in Table 3. Notethat the auction coordinator could also have shifted the closing timesonly. In that case, all lots would have gone to Open status and bidderscould have commenced bidding immediately. TABLE 3 Current Time: 9:32:22AM Lot # Lot Name Opening Time Closing Time Status 1 Screws 9:45:00 AM10:15:00 AM Available 2 Nuts 9:45:00 AM 10:45:00 AM Available 3 Bolts9:45:00 AM 11:15:00 AM Available

[0133] Bidding begins on all of the lots at 9:45 AM. Then a secondtechnical disruption occurs at 10:10 AM. This interruption is estimatedto take at least 10 minutes to resolve, which will not be fast enough toprevent Lot 1 shifting to Pending status at 10:15 AM and Closed statusat 10:20 am (assuming a 5 minute Pending interval). In addition, sinceall lots are currently open, bids have already been placed on Lots 2 and3. As the duration of the interruption is unknown, the auctioncoordinator decides to once again place all lots in Pause status untilthe technical difficulty is resolved. Bidders are prevented fromentering bids during this time or bids may be placed into a queue toawait the lifting of the Pause status, but all existing bids arepreserved. The auction now appears as shown in Table 4. TABLE 4 CurrentTime: 10:10:09 AM Lot # Lot Name Opening Time Closing Time Status 1Screws 9:45:00 AM 10:15:00 AM Pause 2 Nuts 9:45:00 AM 10:45:00 AM Pause3 Bolts 9:45:00 AM 11:15:00 AM Pause

[0134] The technical disruption is resolved at 10:30 AM. The auctioncoordinator alters the closing times (but not the opening times) of thelots to give the bidders an additional 10 minutes to bid on Lot 1, andto space out the closing times of Lots 2 and 3 at 20 minute intervals.The auction coordinator does not change the opening times of the lots,and therefore preserves bids that have already been made. All lotsreturn to Open status when the Auction Pause is lifted and may commencebidding immediately. The auction now appears as shown in Table 5. TABLE5 Current Time: 10:30:25 AM Lot # Lot Name Opening Time Closing TimeStatus 1 Screws 9:45:00 AM 10:40:00 AM Open 2 Nuts 9:45:00 AM 11:00:00AM Open 3 Bolts 9:45:00 AM 11:20:00 AM Open

[0135] Bidding continues on Lot 1 until 10:55 before the final bid isplaced and the lot shifts to Pending status (i.e. 15 minutes ofOvertime). Assuming a minimum interval of 10 minutes between lot closingtimes, this will push Lot 2 into Extended status moving the scheduledclosing time back to 11:05 AM. The auction now appears as shown in Table6. TABLE 6 Current Time: 10:55:07 AM Lot # Lot Name Opening Time ClosingTime Status 1 Screws 9:45:00 AM 10:55:00 AM Pending 2 Nuts 9:45:00 AM11:05:00 AM Extended 3 Bolts 9:45:00 AM 11:20:00 AM Open

[0136] Now it is discovered that some, but not all, of the bidders onLot 2 have made an incorrect assumption in preparing their quotes. Theauction coordinator needs time to communicate with all bidders andcorrect the error, and estimates that this will require 10-15 minutes.Therefore it will take too long to give all bidders an equal chance ofunderstanding the situation before Lot 2 closes. However, there is nodisruption to Lot 3, which can continue as scheduled. The auctioncoordinator places Lot 2 in the Pause status, and changes the scheduledclosing time for Lot 2 to 11:40 AM. No change is made to Lot 3. Biddingcontinues on Lot 3, but no bids can be placed on Lot 2 at this point.Lot 2 is now scheduled to close after Lot 3. The auction now appears asin Table 7. TABLE 7 Current Time: 10:56:12 AM Lot # Lot Name OpeningTime Closing Time Status 1 Screws 9:45:00 AM 10:55:00 AM Pending 2 Nuts9:45:00 AM 11:40:00 AM Pause 3 Bolts 9:45:00 AM 11:20:00 AM Open

[0137] By 11:17, all of the bidders have received the correctinformation for Lot 2 and re-calculated their bids. At this point, theLot Pause can be lifted from Lot 2. Although bidders are now engaged inthe activity leading up to the close of Lot 3, the lot extension bufferwill ensure that bidders have adequate time to return to Lot 2 once Lot3 bidding ends. The auction now appears as shown in Table 8. TABLE 8Current Time: 11:17:22 AM Lot # Lot Name Opening Time Closing TimeStatus 1 Screws 9:45:00 AM 10:55:00 AM Closed 2 Nuts 9:45:00 AM 11:40:00AM Open 3 Bolts 9:45:00 AM 11:20:00 AM Open

[0138] The lot statuses will now follow their normal procedures throughto the end of the auction.

Bidder-Specific Bid Limitations

[0139] It is common for sellers (upward auctions) and buyers (downwardauctions) to place market limitations on the amounts that bidders maysubmit as valid bids during the course of an online auction. Forexample, a buyer may require that bidding start below a certain ceiling.In this case, the buyer is not interested in making a purchase at anyprice above that limit, and bids submitted above that ceiling are notaccepted. Such a limitation applies across the board to all potentialbidders (suppliers).

[0140] Use of a market-wide bid limitation is inadequate where the buyercan obtain some form of price discovery with respect to individualbidders prior to the online auction. For example, it is not uncommon inindustrial procurement for the buyer to receive bids from potentialsuppliers prior to an online auction. The buyer may have solicited a“first round” of bids (“pre-bids”) prior to deciding to conduct theonline auction, or a series of bids may arrive without solicitation fromthe buyer. At this point, the buyer has three options for conducting theonline auction:

[0141] A first option is to set a ceiling at the highest pre-bid. Inthis case, suppliers who submitted lower pre-bids prior to the onlineauction may commence bidding at a level higher than their pre-bids.During the course of the event, the bidding activity may not reach thelevel of the lowest pre-bid. This could occur for one of two reasons.

[0142] First, since the pre-bids are still valid quotations, and thereends up being little competition from other suppliers, the leaders mayfeel no need to bid online at all until the market approaches the valueof their pre-bids. This is a situation unique to auctions in industrialmarkets where the buyer can award to a non-low bidding supplier(switching costs and non-price variables establish “stickiness” inbidding behavior). Without the leaders bidding at all, there may not beenough competition to drive the online auction to its potential.Possibly, no new bids will be received online at all. The buyer in thiscase has lost the potential for the interactivity of the auction toproduce a better result.

[0143] Second, if the rules of the online auction require the buyer toforego the pre-bids (for example, to avoid the problem described in(a)), then the leaders can start much higher than their pre-bids. Infact, the low bidding pre-bidder only needs to bid slightly lower thansecond place. If there was a significant gap between the pre-bids infirst and second place, the leader may never be driven to bid onlinenearly as low as the pre-bid. The buyer will experience regret at nothaving taken the original low bid.

[0144] A second option is to set a ceiling at the lowest bid. In thiscase, some suppliers may be prevented from bidding because they cannotmeet the ceiling. This does not matter if the buyer is indifferent overwhich supplier to award to (the buyer awards to the lowest bidder eitherat the ceiling or the market price if bidding goes below the ceiling).However, in industrial business-to-business auctions it is not uncommonfor the buyer to choose a non-low bidding supplier (switching costs andnon-price variables affect the final decision). Many suppliers who didnot have the lowest bid prior to the online auction may want to reducetheir bid to close the gap on the lowest placed bidder. They may not beable to match the lowest bid, but they may be able to improve theirposition. However, the ceiling in the online auction prevents them frombidding at all. Thus, the buyer loses the benefit of receiving thelowest bid possible from such suppliers.

[0145] A third option is to set a ceiling somewhere between the lowestand highest bid. Now the buyer is exposed to both of the problemsoutlined above, and must “second guess” the bidders as to the “best”level to set the ceiling. Note that this is a problem unique toindustrial business-to-business markets. In most other auctionsituations, the market-leading bid automatically wins, and setting theceiling at the lowest bid would be perfectly acceptable. It is onlybecause of the fact that the buyer can award to any participant in themarket, and may prefer a supplier who is not the lowest, that thisproblem arises.

[0146] The bidder-specific bid limitations feature addresses theshortcomings of market-wide bid ceilings. With this feature, an onlineauction can set up such that individual bidders have different limits onthe bids that will be accepted during the course of the auction. For anupward auction, the seller may set different floor prices for differentbidders. For a downward auction, individual ceiling prices can beestablished for bidders. This avoids the “buyer's (or seller's) regret”associated with the market-wide bid limitations described above.

[0147] Consider the following example illustrated in Table 9. In thisexample, the buyer had collected a “Round 1” series of pre-bids (inconfidence) which are listed below in Table 9. TABLE 9 Historic Price =$10,564,300 Actual Online Auction Results (w/Bidder-Specific Pre-bidResults Bid Limitations) Savings Savings Rank Bidder Bid (%) Bidder Bid(%) 1 Supplier  $8,515,383 19.4% Supplier $8,352,524 20.9% A A 2Supplier  $9,129,639 13.6% Supplier $8,463,769 19.9% B B 3 Supplier $9,635,396 8.8% Supplier $8,674,775 17.9% C C 4 Supplier $10,289,3202.6% Supplier $9,465,808 10.4% D D

[0148] While the bids from Suppliers A and B were more attractive, thebuyer actually preferred to deal with either Supplier C or D, who wouldnot lower their price any further through manual negotiation. The buyerdecided to hold an online auction but wanted to ensure that supplierswould not start bidding higher than their pre-bids. Since the bids werereceived in confidence (as is often the case), the buyer could notsimply enter opening bids equal to their previous best “on behalf” ofthe suppliers.

[0149] An online auction is then conducted on the basis that thepre-bids would be foregone, and only a supplier who participated in theonline auction would be awarded the business. Accordingly, all supplierswould have to re-bid to win the business. Instead of a market-wideceiling, individual bid ceilings were established for each supplierequal to their pre-bid. For example, Supplier B could submit a bidonline equal to or below $9,129,639, but not higher. The individual bidceilings are not visible to the other suppliers. The result of theonline auction with bidder-specific bid limitations is also shown inTable 9.

[0150] As illustrated, all suppliers lowered their bids as a result ofthe online auction. Note that suppliers C and D did not drop their bidsto meet the lowest bidder, but reduced their quote to a “walk-away” bidsubstantially lower than their offline bids. However, it is clear thatif the buyer had established a market-wide ceiling at the lowest offlinebid ($8,515,383), Suppliers C and D would not have been able to bid atall. The buyer would have lost the opportunity to award one of thepreferred suppliers (Supplier C), at a bid that is $960,621 better thanthe offline bid ($9,635,396 less $8,674,775). In an industrial supplymarket, the difference between Supplier C ($8,674,775) and Supplier A($8,352,524) may not justify the intangible risk and qualification costsof switching from a trusted supplier to a new source.

[0151] Consider also the (hypothetical) outcome shown in Table 10 below.TABLE 10 Historic Price = $10,564,300 Actual Online Auction Results(w/Bidder-Specific Pre-bid Results Bid Limitations) Savings Savings RankBidder Bid (%) Bidder Bid (%) 1 Supplier  $8,515,383 19.4% Supplier$8,515,383 19.4% A A 2 Supplier  $9,129,639 13.6% Supplier $8,874,01216.0% B B 3 Supplier  $9,635,396 8.8% Supplier $8,821,191 15.5% C C 4Supplier $10,289,320 2.6% Supplier $9,465,808 10.4% D D

[0152] In this example, as a result of the online auction, Suppliers B,C and D lowered their bids to the “walk-away prices” assumed above.Supplier A did not lower their bid but were forced (by thebidder-specific bid limitations feature) to place a bid equal to the bidplaced offline. If they did not bid at all, according to the auctionrules they would have been ineligible for an award.

[0153] Consider the potential outcomes in the absence of abidder-specific bid limitations feature. In a first scenario, the buyerestablishes a market-wide ceiling at the lowest offline bid($8,515,383). The result is shown below in Table 11. TABLE 11 HistoricPrice = $10,564,300 Online Auction Results (w/Bidder-Specific BidPre-bid Results Limitations) Savings Savings Rank Bidder Bid (%) BidderBid (%) 1 Supplier  $8,515,383 19.4% Supplier $8,515,383 19.4% A A 2Supplier  $9,129,639 13.6% Supplier No bid  0% B B 3 Supplier $9,635,396 8.8% Supplier No bid  0% C C 4 Supplier $10,289,320 2.6%Supplier No bid  0% D D

[0154] In this case, all suppliers would have been prevented fromsubmitting a bid online, except for Supplier A. The buyer may still beable to accept the offline bids, but at best they lose the opportunityto receive a better bid from Supplier B, C and D.

[0155] In a second scenario, the buyer establishes a market-wide ceilingat the highest offline bid ($10,289,320), and chooses to forego theright to accept the offline bids. The result is shown below in Table 12.TABLE 12 Historic Price = $10,564,300 Online Auction Results(w/Bidder-Specific Bid Pre-bid Results Limitations) Savings Savings RankBidder Bid (%) Bidder Bid (%) 1 Supplier  $8,515,383 19.4% Supplier$8,863,448 16.1% A A 2 Supplier  $9,129,639 13.6% Supplier $8,874,01216.0% B B 3 Supplier  $9,635,396 8.8% Supplier $8,926,834 15.5% C C 4Supplier $10,289,320 2.6% Supplier $9,465,808 10.4% D D

[0156] In this case, Suppliers B, C and D compete by lowering theirquotes in response to bids placed by the other suppliers until they eachreach their walk-away price. Once they reach their walk-away price theystop bidding. When the lowest bid reaches Supplier B's walk-away price($8,874,012), all suppliers cease to bid except for Supplier A. SupplierA places one bid just below Supplier B to reach first place. With noresponse from Supplier B, the auction closes. The buyer has lost thepotential to extract an additional $348,065 from Supplier A ($8,863,448less $8,515,383).

[0157] In a third scenario, the buyer establishes a market-wide ceilingat the highest offline bid ($10,289,320), and chooses to retain theright to accept the offline bids. In this case, the outcome is highlydependent on the behavior and beliefs of the individual bidders. In theworst possible scenario, all suppliers are highly confident of theiroffline bids and see no reason to place a bid until they are challengedby a better bid online. In this situation, it is possible that no-oneplaces a bid, each supplier waiting for someone else to make a move. Themarket closes with no activity and the buyer loses all potential gainsfrom an interactive auction (Table 10).

[0158] In the best possible situation, Supplier A does not realize theyhave the leading bid and is concerned that someone else is betterplaced. Supplier A would likely place a bid above their walk-away price.Assume A places a bid at $9,200,000, above B's offline bid but below Cand D's. D responds with their walk-away bid, $9,465,808 (the best theycan do). C responds and continues to bid against A until the leadingbids go below B's offline bid. At this point B is drawn into thecompetition. Bidding will likely continue until B and C reach theirwalk-away prices. At this point, A does not need to bid further online,but will be bound to honor their pre-bid. The buyer has achieved all ofthe gains of Table 6.

[0159] A range of other scenarios could also arise, depending on how thebidders behave and what the relative walk-away prices and offline bidsare. If C and D had walk-away prices above B's offline bid, then C, D,and A would have stopped bidding before B was drawn into thecompetition. In which case, the result could have been considerablyworse. The point here is that using an online auction can be risky forthe buyer in some situations, due to the potential to share amongsuppliers data that might be better withheld. Bidder-specific bidlimitations help achieve the optimal outcome.

Error detection and prevention

[0160] It is not uncommon for a bidder to make errors when placing bidsduring an auction. The prior system prevented some of these errorsthrough the use of a confirmation pop-up box on the bidder's userinterface. When a bidder submits a bid, the software presents aconfirmation pop-up box to the bidder, as shown in FIG. 15A. This boxrepeats the lot and bid amount, and asks the bidder to confirm that thisinformation is correct prior to sending the bid across the network tothe auction server. The bidder must either confirm the bid by clickingon the “confirm” button or cancel the bid using the “cancel” button.Failure to take action at this point will result in no bid beingentered. Once a bid is confirmed and sent to the auction server, it isentered into the online auction and market information from that bid isdisplayed to all bidders.

[0161] However, the confirmation pop-up box is self-governing. It onlyhelps in situations where the bidder believes the bid is incorrect;there is no system-based intelligence in the confirmation pop-up box.Therefore, some bidders have entered erroneous bids even though they hadto confirm the bids. The pace of the auction, and bidding on multiplelots simultaneously allows for bidder errors. Because erroneous bidsaffect the critical integrity of the auctions, additional errordetection and prevention features were developed using system-basedintelligence.

[0162] One additional layer of protection is through failsafefunctionality. Failsafe rules allow the auction coordinator to limit thebidders' ability to enter certain bids. The consequences for breakingthese rules can also be established up front. First, a bidder may berequired to make additional bid confirmations (beyond the firstconfirmation pop-up box) prior to submission and acceptance of the bid.Second, a bidder may be prevented entirely from entering bids that failcertain pre-defined criteria. One feature of the present invention isthe ability to flexibly pre-define failsafe criteria, and flexiblypredefine consequences if that criteria is met, all in relation tospecific online auctions and different lots within an auction.

[0163] In one embodiment, the failsafe rules are implemented by theserver component. In an alternate embodiment, the failsafe rules areimplemented by the client component.

[0164] Another error prevention feature is the override function.Override allows the auction coordinator to override or remove erroneousbids from the auction in real-time. A bid can be quickly and efficientlyremoved before it prejudices the positions of other bidders. If a secondbidder has already bid in response to an erroneous bid, allconsequential bids can be removed as well. Accordingly, auctions can becompleted by picking up from the point of the last valid bid, ratherthan starting over.

[0165] If a bid is overridden, the auction coordinator warns the biddersthat an erroneous bid has been received and removed through a messagethat is sent to every bidder and appears as a warning on their userinterface. The auction coordinator types in a text message and send itto each bidder over the same network that is running the auction.Message boxes appear on bidding screens and bidders must click “OK”before they can continue to bid.

[0166] As an example of these two features, Suppliers B, C, D, & E areengaged in a competitive interaction on Lot 1 of a multi-lot auctionbetween 1:25 PM and 1:27:30 PM at a price between $1.5 to $1.6 million.The lot is scheduled to close at 1:40 PM, as shown in Table 13. TABLE 13LOT 1 - Historic Price = $1,768,334 Bidder Bid Time Bid Savings (%)Supplier A 1:07:59 PM $1,801,048 (1.85%) Supplier B 1:25:07 PM$1,585,190 10.36% Supplier C 1:25:49 PM $1,563,522 11.58% Supplier D1:26:32 PM $1,555,230 12.05% Supplier C 1:27:10 PM $1,549,674 12.37%Supplier E 1:27:30 PM $1,542,899 12.75%

[0167] Prior to the opening of the auction, the auction coordinatoractivated three failsafe rules. First, once a bidder has placed aninitial bid, they may not bid more than 20% below their immediatelypreceding bid. In this example, the rule is defined so that a bidder isprevented from submitting such a bid at all. Second, bidders may notplace a bid more than 10% below the current market leading bid. A bidthat is below this level activates a warning box displayed in FIG. 15B.Bidders must confirm such a bid for a second time before it will besubmitted. Third, no bid more than 70% below historic price will beaccepted at any point throughout the auction.

[0168] Supplier F decides to commence bidding on Lot 1. On their openingbid, Supplier F omits a zero from the bid amount, entering $153,507instead of $1,525,070. This is an opening bid 91% below historic and 78%below market, thereby violating the second and third rules. Supplier Fis prevented from entering this bid.

[0169] Next Supplier F enters the bid of $1,525,070. This bid does notviolate any failsafe rule and is accepted. Supplier C responds with alower bid and the market is now as shown in Table 14. TABLE 14 LOT 1 -Historic Price = $1,768,334 Bidder Bid Time Bid Savings (%) Supplier A1:07:59 PM $1,801,048 (1.85%) Supplier B 1:25:07 PM $1,585,190 10.36%Supplier C 1:25:49 PM $1,563,522 11.58% Supplier D 1:26:32 PM $1,555,23012.05% Supplier C 1:27:10 PM $1,549,674 12.37% Supplier E 1:27:30 PM$1,542,899 12.75% Supplier F 1:28:46 PM $1,535,070 13.19% Supplier C1:29:15 PM $1,533,894 13.26%

[0170] Supplier F attempts to respond quickly, entering $1,158,000instead of $1,518,000. This bid is over 20% below the last bid placed bySupplier F, and more than 10% below the market, This bid violates thefirst and second failsafe rules, and Supplier F is prevented fromentering this bid at all. Supplier F corrects this mistake and enterstheir best and final bid for this lot ($1,518,000).

[0171] Supplier F begins monitoring the activity on other lots anddecides to place a bid of $1,354,200 in Lot 2, but inadvertently placesthe bid in Lot 1. This bid is not greater than 20% below the previousbid, nor is it more than 10% below the current market leading bid.Accordingly, none of the failsafe rules are activated and the bid isentered.

[0172] Supplier F immediately recognizes the mistake and contacts theauction coordinator. After confirming that this is a bona fide error,the auction coordinator warns the other participants that the latest bidfrom Supplier F is erroneous and activates the override feature. The bidis removed from the online auction.

[0173] Bidding continues on this lot without a disruption in the auctionprocess, and without prejudicing the position of the other bidders.

[0174] The operation of the error detection features are illustrated inthe flow chart in FIG. 15, as shown in process 800. A bidder enters abid at step 810. A confirmation box is then displayed to the bidder atstep 820. An example of the bid confirmation box is shown in FIG. 15A.If the bidder decides not to enter the bid in step 830, then the bid iscanceled, and the bidder can then enter another bid in step 810. If thebidder confirms the bid at step 830, then the bid is checked againstpredefined failsafe criteria at step 840. The first check is to see ifthe bid fails predefined criteria that prevents the bid from beingentered entirely. If the bid does fail this first test, then a message,such as the one in FIG. 15B, is displayed to the bidder in step 845, andthe bidder must reenter the bid at step 810. If the bid passes the firstfailsafe criteria, then a second check is performed at step 850. Forthis second level of predefined criteria, if the bid fails to pass, thenthe bidder may still enter the bid if he confirms it again at step 855.An example of the reconfirmation box is shown in FIG. 15C. If the bidderreconfirms the bid, then is entered into the auction at step 860. If thebid passed the reconfirmation failsafe criteria at step 850, then noreconfirmation is needed, and the bid is entered into the auction atstep 860. The entire process 800 is repeated for every bid that issubmitted in the auction.

[0175] While the invention has been described in detail and withreference to specific embodiments thereof, it will be apparent to oneskilled in the art that various changes and modifications can be madetherein without departing from the spirit and scope thereof. Inparticular, it should be noted that while the auction functionsdescribed above have been described in the context of downward pricingauctions the auction functions can be equally applied to upward pricingauctions. Thus, it is intended that the present invention cover themodifications and variations of this invention provided they come withinthe scope of the appended claims and their equivalents.

What is claimed is:
 1. A method of conducting a business-to-businessonline auction for custom industrial products or materials between abuyer and a plurality of potential sellers, comprising the steps of: (a)offering a first and a second lot, defined at least in part by a buyer,to a plurality of potential sellers, said first and second lots havingat least one product; (b) defining a closing time for said first lotbefore which bids for said first lot are to be submitted by potentialsellers; (c) defining a closing time for said second lot before whichbids for said second lot must be submitted by a potential seller, saidclosing time for said second lot being later than said closing time forsaid first lot by a first time interval; (d) receiving bids frompotential sellers for said first lot; (e) extending said closing time ofsaid first lot by an incremental amount of time upon the occurrence of apredetermined lot extension criterion relating to said received bids;and (f) extending said closing time of said second lot if said extendedclosing time of said first lot precedes said closing time of said secondlot by less than a second time interval.
 2. The method of claim 1 ,wherein step (e) comprises the step of determining whether a receivedbid is better than the best of the previously received bids.
 3. Themethod of claim 2 , wherein step (e) comprises the step of determiningwhether a received bid is the lowest bid.
 4. The method of claim 1 ,wherein step (e) comprises the step of determining if a received bid iswithin a predetermined amount of a preceding bid.
 5. The method of claim1 , wherein step (e) comprises the step of determining whether a bid isreceived within a third time interval of said first lot closing time. 6.The method of claim 1 , further including the steps of: offering a thirdlot to the plurality of potential sellers; defining a closing time forsaid third lot before which bids for said third lot must be submitted bya potential seller, said closing time for said third lot being laterthan said closing time for said second lot by a fourth time interval;determining whether said extended closing time of said second lotprecedes said closing time of said third lot by less than a fifth timeinterval; and, if so, extending said closing time of said third lot. 7.A method of conducting an online auction between a buyer and a pluralityof potential sellers, comprising the steps of: (a) offering a pluralityof lots, defined at least in part by a buyer, to a plurality ofpotential sellers, each of said plurality of lots having at least oneproduct; (b) defining a closing time for each of said plurality of lots,wherein a closing time for a lot defines a time before which bids forthe lot are to be submitted by a potential seller; (c) upon theextension of a closing time for a first lot, determining whether aclosing time for a second lot is within a predefined time interval fromthe extended closing time of said first lot; and (d) if the closing timefor said second lot is within a predefined time interval from theextended closing time of said first lot, extending said closing time ofsaid second lot such that the time between the extended closing time ofsaid second lot and the extended closing time of said first lot is atleast said predefined time interval.
 8. The method of claim 7 , furthercomprising the steps of: upon the extension of a closing time for saidsecond lot, determining whether a closing time for a third lot is withinsaid predefined time interval from the extended closing time of saidsecond lot; and if the closing time for said third lot is within apredefined time interval from the extended closing time of said secondlot, extending said closing time of said third lot such that the timebetween the extended closing time of said third lot and the extendedclosing time of said second lot is at least said predefined timeinterval.
 9. A method of conducting a business-to-business onlineauction for custom industrial products or materials between a buyer anda plurality of potential sellers, comprising the steps of: (a) offeringa plurality of lots, defined at least in part by a buyer, to a pluralityof potential sellers, each of said plurality of lots having at least oneproduct; (b) defining a closing time for each of said plurality of lots,wherein a closing time for a lot defines a time before which bids forthe lot are to be submitted by a potential seller; (c) defining anovertime extension parameter for each of said plurality of lots, saidovertime extension parameter indicating a length of an overtime periodfor an associated lot, wherein an overtime extension parameter for a lotis based upon characteristics of one or more items in the lot; (d)determining whether an overtime period is triggered in one of saidplurality of lots; and (e) if an overtime period is triggered in saidone of said plurality of lots, extending the auction for said one ofsaid plurality of lots by an amount of time defined by said overtimeextension parameter associated with said one of said plurality of lots.10. The method of claim 9 , further comprising the step of storingovertime extension parameters for each of said plurality of lots. 11.The method of claim 9 , wherein step (e) comprises the step of addingthe value of an overtime extension parameter with a market closing timefor a lot.
 12. The method of claim 9 , further comprising the step ofdynamically varying an overtime extension parameter associated with alot during an auction for the lot.
 13. A method of conducting abusiness-to-business online auction for custom industrial products ormaterials between a buyer and a plurality of potential sellers,comprising the steps of: (a) offering a lot, defined at least in part bya buyer, to a plurality of potential sellers, said lot having at leastone product; (b) defining a closing time for said lot, wherein saidclosing time for said lot defines a time before which bids for the lotare to be submitted by a potential seller; (c) receiving a first bidfrom a potential seller for said lot; (d) identifying said first bid asa current best bid; (e) comparing each successively received bid to saidcurrent best bid, and identifying said successive bid as said currentbest bid if said successive bid is better than said current best bid;(f) within a first time interval of said closing time for said lot, (i)determining whether a received bid is better than said current best bid;(ii) if said received bid is better than said current best bid,identifying said received bid as said current best bid and extendingsaid closing time for said first lot by a second time interval; (iii) ifsaid received bid is not better than said current best bid, determiningwhether said received bid satisfies at least one behind-market bid lotextension criteria; and (iv) if said received bid satisfies at least onebehind-market bid lot extension criteria, extending said closing timefor said first lot by a third time interval.
 14. The method of claim 13, wherein said second time interval is equal to said third timeinterval.
 15. The method of claim 13 , wherein step (f)(iii) comprisesthe step of determining whether said received bid is received within afourth time interval of said closing time.
 16. The method of claim 13 ,wherein step (f)(iii) comprises the step of determining whether saidreceived bid is within a predefined percentage of said current best bid.17. The method of claim 16 , wherein step (f)(iii) comprises the step ofstoring a percentage parameter in memory.
 18. The method of claim 13 ,wherein step (f)(iii) comprises the step of determining whether saidreceived bid is higher than said current best bid by a selected amount.19. The method of claim 18 , wherein step (f)(iii) comprises the step ofstoring a price distance parameter in memory.
 20. The method of claim 16, wherein step (f)(iii) comprises the step of determining whether saidreceived bid is from an incumbent supplier.
 21. The method of claim 20 ,wherein the step (f)(iii) comprises the step of storing an incumbentsupplier parameter in memory.
 22. The method of claim 13 , wherein step(f)(iii) comprises the step of determining whether said received bid iswithin a predefined number of rank ordinal positions of said currentbest bid.
 23. The method of claim 22 , wherein step (f)(iii) comprisesthe step of storing an ordinal position parameter in memory.
 24. Amethod of conducting an online auction between a buyer and a pluralityof potential sellers, comprising the steps of: (a) offering a lot,defined at least in part by a buyer, to a plurality of potentialsellers, said lot having at least one product; (b) defining a closingtime for said lot, wherein said closing time for said lot defines a timebefore which bids for the lot are to be submitted by a potential seller;(c) within a first time interval of said closing time for said lot,determining if a received bid satisfies at least one behind-market bidlot extension criteria, wherein said at least one behind-market bid lotextension criteria can be satisfied if said received bid is not betterthan a current best bid; and (d) if said received bid satisfies at leastone behind-market bid lot extension criteria, extending said closingtime for said first lot by a second time interval.
 25. The method ofclaim 24 , wherein step (d) comprises the step of determining whethersaid received bid is received within a third time interval of saidclosing time.
 26. The method of claim 24 , wherein step (d) comprisesthe step of determining whether said received bid is within a predefinedpercentage of said current best bid.
 27. The method of claim 26 ,wherein step (d) comprises the step of storing a percentage parameter inmemory.
 28. The method of claim 24 , wherein step (d) comprises the stepof determining whether said received bid is higher than said currentbest bid by a selected amount.
 29. The method of claim 28 , wherein step(d) comprises the step of storing a price distance parameter in memory.30. The method of claim 24 , wherein step (d) comprises the step ofdetermining whether said received bid is from an incumbent supplier. 31.The method of claim 30 , wherein step(d) comprises the step of storingan incumbent supplier parameter in memory.
 32. The method of claim 24 ,wherein step (d) comprises the step of determining whether said receivedbid is within a predefined number of rank ordinal positions of saidcurrent best bid.
 33. The method of claim 32 , wherein step (d)comprises the step of storing an ordinal position parameter in memory.34. A bidding method in an auction between a buyer and a plurality ofpotential sellers, comprising the steps of: (a) receiving initial lineitem bids for individual line items in a lot of products, at least oneof said initial line item bids including a locked portion and anunlocked portion; (b) calculating an initial lot bid price using saidinitial line item bids; (c) receiving an adjustment to the total bid fora lot; (d) calculating line item price adjustments using said lot bidadjustment, wherein line item price adjustments are made on a pro ratabasis to the unlocked portions of said initial line item bids; and (e)calculating an updated lot bid price using said line item adjustments.35. The method of claim 34 , wherein step (c) comprises the step ofreceiving information representing a price adjustment for said initiallot bid price.
 36. The method of claim 34 , wherein step (c) comprisesthe step of receiving information representing a percentage reduction insaid initial lot bid price.
 37. The method of claim 34 , wherein step(a) comprises the step of receiving an initial line item bid for a lineitem having only a locked portion.
 38. The method of claim 34 , whereinstep (a) comprises the step of receiving an initial line item bid for aline item having only an unlocked portion.
 39. The method of claim 34 ,further comprising the step of determining whether said lot bidadjustment exceeds a sum of all of the unlocked portions in said initialline item bids.
 40. The method of claim 34 , further comprising the stepof unlocking at least part of a locked portion of a line item bid. 41.The method of claim 34 , further comprising the step of storing lockedand unlocked portions of each of said line item bids.
 42. A computerprogram product for enabling a processor in a computer system to processbidding information in an auction between a buyer and a plurality ofpotential sellers, said computer program product comprising: a computerusable medium having computer readable program code means embodied insaid medium for causing an application program to execute on thecomputer system, said computer readable program code means comprising afirst computer readable program code means for enabling the computersystem to receive initial line item bids for individual line items in alot of products, at least one of said initial line item bids including alocked portion and an unlocked portion; a second computer readableprogram code means for enabling the computer system to calculate aninitial lot bid price using said initial line item bids; a thirdcomputer readable program code means for enabling the computer system toreceive a lot bid adjustment; a fourth computer readable program codemeans for enabling the computer system to calculate line item priceadjustments using said lot bid adjustment, wherein line item priceadjustments are made on a pro rata basis to the unlocked portions ofsaid initial line item bids; and a fifth computer readable program codemeans for enabling the computer system to calculate an updated lot bidprices using said line item adjustments.
 43. The computer programproduct of claim 42 , wherein said lot bid adjustment is a priceadjustment in said initial lot bid price.
 44. The computer programproduct of claim 42 , wherein said lot bid adjustment is a percentagereduction in said initial lot bid price.
 45. The computer programproduct of claim 42 , wherein a line item bid for a line item has only alocked portion.
 46. The computer program product of claim 42 , wherein aline item bid for a line item has only an unlocked portion.
 47. Thecomputer program product of claim 42 , further comprising computerreadable program code means for enabling the computer system todetermine whether said lot bid adjustment exceeds a sum of all of theunlocked portions in said initial line item bids.
 48. The computerprogram product of claim 42 , further comprising computer readableprogram code means for enabling the computer system to unlock at leastpart of a locked portion of a line item bid.
 49. The computer programproduct of claim 42 , further comprising computer readable program codemeans for enabling the computer system to store locked and unlockedportions of each of said line item bids.
 50. A bidding method in anon-line auction, comprising the steps of: (a) defining a flexible lineitem decision rule, said flexible line item decision rule being createdto accommodate a pre-auction bidding strategy relating to one or moreaspects of a line item portion of a bid for a lot of products; (b)receiving information specifying a bid for a lot of products, said bidincluding a plurality of line item portions for corresponding line itemsin said lot of products; (c) receiving information specifying anadjustment to one or more aspects of said bid for said lot of products;(d) analyzing said adjustment to said one or more aspects of said bidfor said lot of products based on said flexible line item decision ruleto determine a corresponding adjustment to one or more aspects of one ormore line item portions of said bid; and (e) effecting saidcorresponding adjustment to said one or more aspects of said one or moreline item portions of said bid based upon the analysis of step (d). 51.The method of claim 50 , wherein step (a) comprises the step of defininga locked portion and an unlocked portion for one or more line itemportions of said bid.
 52. The method of claim 51 , wherein step (d)comprises the step of calculating line item price adjustments using alot bid adjustment, wherein line item price adjustments are made on apro rata basis to the unlocked portions of the line item portions ofsaid bid.
 53. A method of conducting a business-to-business onlineauction for custom industrial products or materials between a buyer anda plurality of potential sellers, comprising the steps of: (a) offeringa lot, defined at least in part by a buyer, to a plurality of potentialsellers, said lot having at least one product; (b) setting a biddingstatus for said lot to a first bidding status indicating that the buyerwill accept bids from the potential sellers on said lot; (c) receivingbids from potential sellers for said lot; (d) upon closing of said lot,changing said bidding status for said lot from said first status to asecond status indicating that the buyer will not accept bids from apotential seller on said lot of products but that said bidding statusmay be subsequently changed to said first bidding status; (e)determining whether a return to open trigger event has occurred within apredetermined time period following the changing of said bidding statusfrom said first status to said second status; (f) if said return to opentrigger event has not occurred, setting said bidding status to a thirdbidding status indicating that the buyer will no longer accept bids fromthe potential sellers on said lot of products; and (g) if said return toopen trigger event has occurred, returning said bidding status for saidlot to said first bidding status.
 54. The method of claim 53 , whereinstep (e) comprises the step of receiving a communication from apotential seller indicating a request for an opportunity to submit afurther bid.
 55. The method of claim 53 , wherein step (g) comprises thestep of returning said bidding status for said lot to said first biddingstatus after auctions on other lots have closed.
 56. The method of claim53 , further comprising the steps of: storing a first value thatspecifies the length of time that said lot will remain in said secondbidding status; and storing a second value that specifies whether saidlot should automatically be changed to said third bidding status uponthe expiration of the length of time specified by said first value. 57.A method of conducting a business-to-business online auction for customindustrial products or materials between a buyer and a plurality ofpotential sellers, comprising the steps of: (a) offering a lot, definedat least in part by a buyer, to a plurality of potential sellers, saidlot having at least one product; (b) defining a closing time for saidlot before which bids for said lot are to be submitted by potentialsellers; (c) setting a bidding status for said lot to a first statusindicating that the buyer will accept bids from potential sellers ofsaid lot; (d) determining whether an auction pausing event has occurred;(e) if an auction pausing event has occurred, changing said biddingstatus for said lot from said first status to a paused status indicatingthat the buyer will not accept bids from the potential sellers on saidlot and that all existing bids for said lot are preserved; (f) alteringsaid closing time for said lot during said paused status for said lot;and (g) changing said bidding status for said lot from said pausedstatus to said first status once said auction pausing event has beencorrected.
 58. The method of claim 57 , wherein step (d) comprises thestep of receiving a notification from a potential seller.
 59. The methodof claim 57 , wherein step (f) comprises the step of receiving inputfrom an auction coordinator that identifies an alteration in saidclosing time.
 60. A method of conducting a business-to-business onlineauction for custom industrial products or materials between a buyer anda plurality of potential sellers, comprising the steps of: (a) offeringa plurality of lots, defined at least in part by a buyer, to a pluralityof potential sellers, each of said plurality of lots having at least oneproduct; (b) defining an opening and a closing time for each of saidplurality of lots; (c) determining whether an auction pausing event hasoccurred; (d) if an auction pausing event has occurred, changing saidbidding status for at least one of said plurality of lots to a pausedstatus indicating that the buyer will not accept bids from the potentialsellers on said lot and that any existing bids for said lot arepreserved; (e) altering at least one of said opening time and saidclosing time for at least one of said plurality of lots during saidpaused status for said lot; and (g) changing said bidding status forsaid lot from said paused status to a second status once said auctionpausing event has been corrected.
 61. The method of claim 60 , whereinstep (c) comprises the step of receiving a notification from a potentialseller.
 62. The method of claim 60 , wherein step (d) comprises the stepof changing said bidding status from an available status to a pausedstatus.
 63. The method of claim 60 , wherein step (d) comprises the stepof changing said bidding status from an open status to a paused status.64. The method of claim 60 , wherein step (d) comprises the step ofchanging said bidding status from an extended status to a paused status.65. The method of claim 60 , wherein step (d) comprises the step ofchanging said bidding status from an overtime status to a paused status.66. The method of claim 60 , wherein step (e) comprises the step ofreceiving input from an auction coordinator that identifies analteration in said closing time.
 67. The method of claim 60 , whereinstep (e) comprises the step of altering an opening time or a closingtime for each of said plurality of lots.
 68. The method of claim 60 ,wherein step (f) comprises the step of changing said bidding status froma paused status to an available status.
 69. The method of claim 60 ,wherein step (f) comprises the step of changing said bidding status froma paused status to an open status.
 70. The method of claim 60 , whereinstep (f) comprises the step of changing said bidding status from apaused status to an extended status.
 71. A method of conducting anonline auction for custom industrial products or materials between abuyer and a plurality of potential sellers, comprising the steps of: (a)setting an individual bid ceiling for each of a plurality of potentialsellers, wherein an individual bid ceiling for at least one of saidplurality of potential sellers is different from an individual bidceiling for another of said plurality of potential sellers; (b)receiving bids from one or more potential sellers; (c) determiningwhether a received bid for a potential seller is greater than acorresponding individual bid ceiling for said potential seller; and (d)if said received bid is greater than said individual bid ceiling forsaid potential seller, communicating to said potential seller that saidreceived bid is invalid.
 72. The method of claim 71 , wherein step (a)includes the step of setting an individual bid ceiling based on pricediscovery prior to the start of the auction.
 73. The method of claim 71, wherein step (a) includes the step of setting an individual bidceiling based on the potential seller's previous offline bid.
 74. Amethod of conducting an auction, comprising the steps of: (a) setting anindividual bid floor for each of a plurality of potential bidders,wherein an individual bid floor for at least one of said plurality ofpotential bidders is different from an individual bid floor for anotherof said plurality of potential bidders; (b) receiving bids from one ormore potential bidders; (c) determining whether a received bid for apotential bidder is less than a corresponding individual bid floor forsaid potential bidder; and (d) if said received bid is less than saidindividual bid floor for said potential bidder, communicating to saidpotential bidder that said received bid is invalid.
 75. The method ofclaim 74 , wherein step (a) includes the step of setting an individualbid floor based on price discovery prior to the start of the auction.76. The method of claim 74 , wherein step (a) includes the step ofsetting an individual bid floor based on the potential bidder's previousoffline bid.
 77. A method of conducting an online auction between aplurality of bidders, comprising the steps of: (a) offering a lot,defined at least in part by an originator, to a plurality of potentialbidders, said lot having at least one product; (b) receiving a bid froma bidder for said lot, said bid being confirmed by said bidder prior tosubmission; (c) determining whether said bid price on said lot passes atleast one bid failsafe criteria, said at least one bid failsafe criteriaincorporating system-based intelligence to determine whether said bidprice on said lot is a permissible bid in view of previously receivedbids; and (d) if said bid price on said lot fails said at least one bidfailsafe criteria, implementing a pre-defined consequence that isassociated with said at least one bid failsafe criteria.
 78. The methodof claim 77 , wherein step (c) comprises the step of comparing said bidprice to a previous bid by said bidder.
 79. The method of claim 78 ,wherein step (c) comprises the step of determining whether said bidprice is within a predefined percentage of a previous bid by saidbidder.
 80. The method of claim 77 , wherein step (c) comprises the stepof comparing said bid price to a historical lot price.
 81. The method ofclaim 80 , wherein step (c) comprises the step of determining whethersaid bid price meets a threshold defined by a historical lot price. 82.The method of claim 77 , wherein step (c) comprises the step ofcomparing said bid price to a market leading bid price.
 83. The methodof claim 82 , wherein step (c) comprises the step of determining whethersaid bid price is within a predefined percentage of a market leading bidprice.
 84. The method of claim 77 , wherein step (d) comprises the stepof preventing said bid price from being submitted.
 85. A method ofconducting an auction between a plurality of bidders, comprising thesteps of: (a) offering a lot, defined at least in part by an originator,to a plurality of potential bidders, said lot having at least oneproduct; (b) defining a closing time for said lot, wherein said closingtime for said lot defines a time before which bids for the lot are to besubmitted by a potential bidder; (a) receiving bids from potentialbidders for said lot; (b) determining whether an erroneous bid has beensubmitted by a bidder; (c) if an erroneous bid has been submitted,deleting in real-time an erroneous bid and any consequential bids ofsaid erroneous bid from the auction; and (d) communicating withpotential bidders that said erroneous bid and said consequential bidshave been deleted from the auction.
 86. The method of claim 85 , whereinstep (b) comprises the step of receiving a communication from a bidderthat a submitted bid is in error.
 87. The method of claim 85 , whereinstep (c) comprises the step of deleting bids from the auction based uponinput from an auction coordinator.
 88. The method of claim 85 , whereinstep (d) comprises the step of causing a message dialog box to bedisplayed to the potential bidders.